Tesla Q1 Profits Beat Estimates and Margins Improved, but Elon Musk Confirmed Hardware 3 Isn't Enough

The first quarter earnings of Tesla are out and the numbers reportedly were better than what analysts projected. They were 16% higher compared to last year, a reason why stocks surged briefly in after-hours trading.

In summary, the earnings per share of Tesla were at $0.41 (£0.30), better than the expected $0.37 (£0.27). The revenue totalled $22.39 billion (£16.59 billion), lower than its target of $22.64 billion (£16.77 billion).

Although Tesla seemingly performed better, those gains didn't last long. With Elon Musk revealing in an earnings call that the company plans to spend about $5 billion (£3.70 billion) this year, the announcement erased the stock bump.

'We're going to be substantially increasing our investments in the future,' Musk said during the earnings call.

Musk plans to invest in Artificial Intelligence (AI), chips and other traditional manufacturing and design costs. Although they boast of Hardware 3 computers, he admits that this will be not enough, especially for driverless operations, or safe for use without active human supervision.

Earnings Reflect Modest Progress Under Elon Musk

Although Tesla's profit overshot projections, they were far from significant in terms of historical standards. In fact, the first quarter numbers were the second-worst net profits and vehicle deliveries of the company based on the earnings report. The worst performance Tesla ever had was during the first quarter of 2025.

Regardless, it is a good sign that things are progressing well for Musk and Tesla. They are baby steps in the right direction. Now focus shifts on what the succeeding months will bring.

According to Tesla, the demand for electric vehicles is rising in some regions, including North America. This is attributed to the rising cost of cars in the market. Although the company experienced some setbacks in recent years. The reason behind this has been linked to Musk's links to US President Donald Trump and a slump in electric vehicle sales. However, that could all change, particularly for Tesla.

'The fact remains that Teslas are still really good electric vehicles,' Cars.com senior editor Damon Bell said.

To back that claim, Bell used the Tesla Model 3 and Model Y as examples. He believes that these two variants are positioned perfectly in the market.

'The Model 3 and the Model Y are really kind of benchmark vehicles that are positioned right in that sweet spot,' he pointed out.

Elon Musk Pushes Tesla Beyond Electric Vehicles

Musk knows that for the company to reach revenue targets, there is a need to branch out and offer other products. Aware of the AI boom, robotics and self-driving cars, the need to invest in next-generation technologies is a must to ensure that Tesla is at pace with other technology companies.

'I think you've seen most, if not all, [of] certainly the major technology companies substantially increasing their capital investments. And we're going to be doing the same. I think it's going to pay off in a very big way,' Musk said.

One of the highly-awaited products on Tesla's end is the humanoid robot called 'Optimus.' Although Musk has a history of setting and missing targets for futuristic products, he appears to be confident that 'Optimus' will become one of their biggest products yet.

'As you've heard me say a few times, I think Optimus will be our biggest product,' Musk said. 'I remain convinced of that conclusion.'

Musk said that Optimus will enter production in the summer and will start being useful outside Tesla by next year.

After its initial appearance at the Tesla Diner in Los Angeles where Optimus served popcorn in July 2025, most were expecting the robot to re-emerge at the earnings call. A staffer told one of the guests that Optimus only appeared during special occasions.

While that was a disappointment, the next best thing is to see what happens in the following months. Musk is determined to broaden Tesla's product line, something that will hopefully translate into better earnings and revenue.